01. What do you know by stale
cheque?- When the cheque becomes out of date and cannot
be encashed, it is termed as stale cheque. For example, the validity period of
any cheque is three months and when a cheque dated: 10.01.2012 is presented for
payment on 10.01.2013, it is considered as a stale cheque, since the cheque is
more than three months old.
02. What do you mean by post
dated cheque?- When the date of the cheque is beyond the date
on which the cheque is presented for payment, the cheque is considered to be
post dated. For example, when a cheque dated: 10.02.2013 is presented for
payment on 10.01.2013, it is considered to be a post dated cheque.
03. What do you know by
current chest? – Currency chests are operated by RBI so that
they can provide good quality currency notes to the public. However, RBI has
appointed commercial banks to open and monitor currency chests on behalf of
RBI. The cash kept in currency chests is considered to be kept in RBI and
04. What is meant by minimum
balance to be maintained in the accounts? In the
case of savings bank and current account deposits, the banks stipulates a
minimum balance to be maintained. The minimum balance varies from bank to bank
and when the balance in the account falls below the minimum balance then banks
debit the account with some penal charges. Some banks insist quarterly average
minimum balance to be maintained instead of regular minimum balance to be
maintained.
05. What do you mean by tax
deduction at source? TDS means tax deducted at source. Banks must
deduct tax from the interest paid on the fixed deposit when the interest paid
on fixed deposits to a customer exceeds Rs. 10000/- during the accounting year.
TDS is applicable to fixed deposits only and is applicable to savings bank
deposits.
06. What do you mean hindu
undivided family? – HUF means Hindu Univided family and it is the
legal entity duly recognized by the laws in India. The account of hindu
undivided family is operated by Karta and karta is the senior most male member
in the family. The remaining members in the family are called as coparceners.
Banks can open deposit accounts and also extend loan facilities to hindu
undivided family.
07. What do you know by MICR? – MICR means magnetic ink character recognition. Nowadays, the
cheques are issued in MICR formats in metropolitan centres namely; Mumbai,
Chennai, Kokatta, Bangalore etc. The micr code is readable by a reader sorter
computer which helps in quick sorting of the cheques towards immediate
adjustment of the amount to be received and paid by the banks in the clearing
house. MICR code consists of the following namely; the cheque number, name of
the city, name of the bank, name of the branch, account category etc. and banks
simply type the amount of the cheque in the MICR portion using scanners so that
the sorter reader is able to read the entire information in regard to the
cheque instantaneously.
08. What do you mean by cheque
truncation? – Under cheque truncation, the physical cheque
is replaced by the digital image of the cheque after scanning. Once the cheque
is truncated the physical cheque is cancelled and from the moment of truncation
only the digital image has life. The digital image of the cheque which contains
the digital signature of a bank officer as to its authenticity is processed by
all banks and payment is effected. Cheque truncation helps in quick processing
of the cheques drawn even on far away places since there is no necessity to
physically move the cheque from one place to another place.
09. What do you mean by ECS?- ECS means electronic
clearing service and this facility is used where a large number of small value
payments or receipts are to be made or received. ECS can be used for either
debit transactions or credit transactions. When a company wants to pay
dividends to large number of shareholders, they use ECS credit facility and by
debiting the company’s account, the shareholders accounts are credited with the
dividend amount instantaneously. Similarly when an accountholder can use ECS
debit facility towards effecting payment to telephone charges each month.
10. What do you mean by
bankassurance? Hitherto banks were dealing with acceptance of
deposits and lending loans to the customers apart from undertaking certain
ancillary services. Nowadays banks started selling insurance policies of
prominent insurance companies by having tie up arrangements with such companies
and banks earn commission for such transactions.
11. What do you mean by
Universal banking? – Universal banking is the concept under which
banks can provide various types of services namely; deposits, loans, safe
deposit lockers, safe custody services, dealing with mutual fund schemes,
selling insurance policies, selling gold coins, dealing with issue of shares
and debentures etc. Thus at present banks are becoming like a supermarket for
all kinds of financial products and such concept is called as universal
banking.
12. What do you mean by
Regional Rural Banks? – The Regional Rural Banks are relatively new
banking institutions which were added to the Indian banking scene since
October, 1975. The distinctive feature of a rural bank is that though it is a
separate body corporate with perpetual succession and common seal, it is very
closely linked with the commercial bank which has sponsored the proposal to
establish it.
13. What do you mean by
National Housing Bank?- National Housing Bank
was established under the National Housing Bank act, 1987 as an apex body and
the key function of National Housing Bank is the development of the housing
sector and it is a wholly owned subsidiary of Reserve Bank of India. National
Housing Bank undertakes the following activities namely; promotion and development
of housing finance companies; regulation and supervision of housing finance
companies and providing both direct finance and indirect finance to housing
sector.
14. What do you mean by
NABARD? – National Bank for agriculture and rural
development was set up in 1982 as an apex development bank in the field of
agricultural finance and rural development. NABARD is set up by the Government
for the purpose of facilitating credit flow for promotion and development
agriculture and integrated rural development. It covers supporting all other
allied economic activities in rural areas, promoting sustainable rural
development and ushering in prosperity in the rural areas
15. What do you mean by EXIM
Bank? – Export and Import Bank of India was set up
during the year, 1982 for the purpose of financing, promoting and facilitating
foreign trade in the country. It is wholly owned by the Government of India.
The bank apart from enhancing exports from the country, integrates the
country’s foreign trade and investment with the overall economic growth.
16. What do you mean by SIDBI? – SIDBI was established for the purpose of assisting and promoting
small scale industry. It was established on 2.4.1990. It is the principal
financial institution established for the promotion, financing and development
of industry in the small scale sector and to coordinate the functions of the
institutions engaged in the promotion and financing or developing industry in
the small scale sector.
17. What do you mean by NBFCs? – Non Banking Finance Companies provide finance for small ventures
but at the same time they are more customer oriented and operate at low volumes
compared to the banks. They also collect deposits from customers and offer slightly
higher interest rates on deposits compared to the banks.
18. What do you mean NEFT and
RTGS – The two options namely – national electronic
funds transfer and RTGS – real time gross settlement offered by Reserve Bank of
India allow electronic transfer of funds from the remitter who has an account
in one bank to the beneficiary who has account in any other bank/branch. The
transfer can be carried out using the internet banking facility. The minimum
amount that can be transferred by RTGS is Rs. 2.00 lakh and there is no such
limit for transfer through NEFT. It is settled in batches at times defined by
the Reserve Bank of India. RTGS transactions are settled continuously as and
when they are put through. The transfer of funds through NEFT and RTGS can also
be carried out by submitting the remittance form at the remitter’s bank branch.
19. What do you mean IFSC code? – IFSC means Indian financial system code. It is a eleven digit code
to identify the bank branch. IFSC code is used while transferring the funds
using RTGS and NEFT payments.
20. What do you mean by
financial inclusion? In spite of vast growth in the banking system,
a large number of poor people are still
not served by any bank. They are living outside the purview of any bank.
Financial inclusion is delivery of financial services at an affordable cost to
the vast population of disadvantaged/low incomes sections of the society
21. What do you mean No frill
accounts? No frill accounts are accounts with very low or
nil minimum balance as well as charges to be opened by the banks as targeted by
Reserve Bank of India. KYC norms are relaxed for opening no frill accounts so
that people living in rural and semi urban areas can open the accounts
conveniently. Overdrafts upto Rs. 25000.00 are allowed in the no frill accounts
22. What do you mean by narrow
banking? – It is the system of banking under which the
bank accepts deposits from the public and places the funds accepted in 100
percent risk free assets with maturity matching for its liabilities. The bank
takes no risk of lending at all.
23. Who are business
facilitators and business correspondents? – RBI has
permitted the banks to use the services of business facilitators and correspondents
with effect from 2006. The services of non governmental officers, microfinance
institutions and civil society organizations can be utilized by the banks. They
help the banks in identifying the borrowers processing their applications etc.
without involving in business transactions. No approval of RBI is necessary.
Correspondents will do all the above and will also participate in business
transactions in a small way.
24. What do you mean by non
performing assets? – Non performing assets means bad loans. When
the principal and interest in the account becomes overdue for more than 90
days, it is treated as non performing assets. Non performance assets are
classified into sub standard assets, doubtful assets and loss assets. Banks are
willing to keep the level of non performance accounts at the lowest.
25. What are the major risks
faced by banks according to Basel II norms? –
Banks are facing credit risk, market risk and operational risk. When the bank
lends an advance, it faces credit risk and sometimes the banks may not be able
to recover the loan amount from the borrowers. In the case of failure of any
bank product, the banks face market risk and operational risk occurs on account
of failure of systems available in the bank branches namely; staff unrest; striking
employees; computer failure; automated teller machines out of order etc.
26. What do you mean by
merchant banking? – Merchant banking stands for provision of
various services to corporate clients by helping them to access capital market.
Merchant banks help the corporate customers to approach the capital market with
initial public offers for the purpose of collection of capital by way of
shares.
27. What do you mean by demat
accounts? Demat means dematerialization. During the early
days, shares and debentures certificates were issued in physical form in the
form of certificates. At present, they are issued in electronic form. It is the
process by which paper securities are converted to electronic form so that they
can be stored, sold and transferred easily.
28. What is a depository? – A depository holds the securities of the investors in electronic
form. In our country there are two depositories namely; NSDL – National
Securities Depositories Limited promoted by National Stock Exchange and CDSL –
Central Depository Services Limited promoted by Bombay Stock Exchange.
29. What do you know by
consortium financing? When a corporate is in need of huge finance –
say Rs. 200 crores and above, banks join together and extend the loan
facilities by sharing the loan amount between themselves. This reduces the risk
for each bank. The banks jointly process the application of the borrower and
sanction the advance and this is called consortium lending.
30. What do you mean by repo
rate? – It is the rate at which RBI lends short term
funds to the commercial banks against securities. In order to temporarily
expand the money supply, the central bank decreases repo rates enabling the
banks to swap the government securities for cash. Repo is the abbreviation of
Repurchase and to contract the money supply RBI increases the repo rates.
31. What do you mean reverse
repo ? – The reverse repo rate is the interest rate
that banks receive if they deposit money with the central bank. This reverse
repo rate is always lower than the repo rate. Increases or decreases in the
repo and reverse repo rate have an effect on the interest rate on banking
products such as loans, mortgages and savings.
32. What do you mean by CRR? – CRR means Cash Reserve Ratio and as per the stipulations by
Reserve Bank of India, all banks are in a position to maintain a certain
percentage of their deposits (technically called as net demand and time
liabilities) in their account with the RBI. CRR ranges from 5 percent to 15
percent. By increasing CRR by merely 0.25 percent, an amount of Rs. 15000
crores of liquid funds can be transferred from the commercial banks to the
coffers of RBI. When CRR is reduced, the liquid funds are transferred from RBI
to commercial banks.
33. What do you mean by SLR? – Statutory Liquidity Ratio refers to the stipulation by RBI that
approximately 25 percent of the banks deposits is to be kept in the form of
government securities, gold and cash. Primarily SLR refers to the amount
invested by the banks in Government of India securities. RBI has the right to
change the statutory liquidity ratio from time to time. On reduction of SLR,
the availability of funds for the banks moves up and banks tend to more loans
to the common public. In the case of increase in SLR, banks reduce bank
lending.
34. What do you mean by PLR? –
Prime lending rate is the rate at which
commercial banks are willing to lend to their triple A rated No 1 borrowers.
The lending rates by the bank for other borrowers whose credit worthiness is
low will be more than prime lending rate. RBI has deregulated the lending rates
that are to be charged by the banks for advance above Rs. 2 lakhs.
35. What do you mean by BPLR? – It is the rate at which commercial banks must charge to all their
advances less than Rs. 2 lakhs.
36. Who is a non resident
Indian? – Non resident Indian is the person who is the
Indian citizen who is residing in abroad for more than 182 days and has gone
for abroad for the purposes namely; business, studies and employment.
37. What are the different
types of accounts that can be opened by Non Resident Indians? – Non resident ordinary account, Non resident External account, FCNR
account and RFC account.
38. What are the different
currencies in which FCNR accounts can be opened? – FCNR accounts can be opened in the following currencies namely; US
dollar, pound sterling, Euro, Australian dollar, Japanese Yen and Canadian
dollar. FCNR accounts can be opened for a minimum period of one year and
maximum period of three years
39. What are the traditional
functions of RBI? – The traditional functions of RBI are – issue
of currency, forex management, export assistance, clearing house functions,
change of currency, transfer of currency, publication of statistics and other
information and training in banking.
40. What are the developmental
functions of RBI? – The developmental functions of RBI are –
agriculture development, promotion of industrial finance, promotion of export
through refinance, development of bill market, development and regulation of
banking system.
41. What are the regulatory
functions of RBI? – The regulatory functions of RBI are –
qualitative credit control, bank rate, differential rate of interest, open
market operations, Maintenance of CRR and SLR, direct action, credit authorization
scheme and moral persuasion
42. What are the different
types of financial institutions in our country? – The various financial institutions in our country are – RBI –
Reserve Bank of India; SEBI – Securities and Exchange Board of India and IRDA –
Insurance Regulatory and Development Authority of India. RBI monitors the
various banks in the country; SEBI monitors and regulates capital markets and
IRDA monitors the functions of insurance companies.
43. What are the different
types of banks in our country? – In our
country the following banks are available – savings banks; commercial banks;
industrial banks; development banks; land development banks; indigenous banks;
central bank; cooperative banks; exchange banks and consumer banks
44. What are the different
types of secondary functions of any bank? – They
are agency or representative functions; general utility services and social
development functions.
45. What do you mean by agency
or representative functions of any bank? – They are
collection and payment of various items; purchase and sale of securities;
trustee and executor; remitting money; purchase and sale of financial exchange;
letter of references and other agency functions.
46. What are the general
utility services offered by the banks? – They
are locker facilities; business information; help in transportation of goods;
acting as a referee; issuing of letters of credit; acting as underwriters;
issue of traveler cheques; issue of gift cheques and dealing in merchant
banking activities
47. What are the social
development functions of a bank ? – They are
capital formation; inducement to innovations; impact on the rate of interest;
role on the development of rural sector; helping in pushing up the demand
48. Can you name some items
which are covered under negotiable instruments act? – They are promissory notes, bills of exchanges; cheques, exchequer
bills; circular notes; dividend warrants; share warrants; bearer debentures;
bank notes and bank drafts
49. What do you mean by
priority sector advance? – In order to boost
development of agriculture and industries, Government of India has stipulated
certain norms under which banks are in a position to allocate 40 percent of
their advances exclusively to certain categories of borrowers called as
priority sector advances. The following are classified into priority sector
advances namely – retail traders, small business, professional and self
employed; agriculture; small scale industries, self help groups, differential
rate of interest and SC/ST beneficiaries
50. What do you mean by weaker
sections? – The following categories are termed as weaker
sections namely – small business enterprises; marginal farmers;
artisans/village and cottage industries for whom loans are granted upto Rs.
50000.00; SGSY beneficiaries; SC/ST beneficiaries; DIR beneficiaries; SJSRY
beneficiaries; SLRS; self help groups and people belonging to minority
community.
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